preparedness will interact with each other and SAW funding climate facet (croc) in such a way that new venture success will be the highest. Utilizing the regression module in STATA, moderated regression was used to determine the relationship.
The regression analysis was performed using standardized data and all possible interactions. The results are shown in Table 7. The results failed to support H4. Sit and wait climate did not appear to moderate the relationship between entrepreneurial passion and preparedness and new venture success, such that when passion and preparedness are high, the moderated relationship of passion and preparedness to new venture success is most positive. The interactive effects are shown in Figure 11.
1 1.5 2 2.5 3 3.5 4 4.5 5
Low High
Dependent variable
Low Shark High Shark
Table 7
Moderated Multiple Regression: Passion, Preparenedness, and SAW
B SE t p F R2 ^R2
Note. Level of significance:*p < .05
Figure 11. Interaction of SAW and passion and preparedness on New Venture Success.
1
Summary
The items in the scale survey on funding climate appear to align with each other in that they measure the latency behaviors to a high degree that they represent. Additionally, crocodile climate described as Sit and Wait, hawk climate described by Sit and Pursue, and shark climate described as Active are all correlated to each other but also unique to a fair degree. There appears to be evidence of a climate for funding comprised of those three facets, based on the comparative fit index measures after running the model through a CFA supported more thoroughly by tests for absolute fit and model fit. The relationship of the interaction between these funding climate facets do not appear to be statistically significant to an entrepreneur’s new venture success, regardless of the amounts of passion or preparedness brought forth.
CHAPTER VI
DISCUSSION
Overall Interpretation
This research reveals evidence that a new type of climate is present in the greater organizational behavior domain of climate theory. Whether considered an extension of the current collection of climates well documented in the literature (Ostroff, Kinicki &
Tampkins, 2003) or new learning outside of ongoing academic conversations, there appears to be definitive evidence to include a new climate dimension about funding. The results from my analysis offer supporting evidence for the existence of a funding climate in the competitive entrepreneurial business and funding source marketplace. Thus, the primary contribution of this paper is extending the current set of descriptive climates in the literature by adding to the list a climate for funding.
Surprisingly, the secondary hypotheses’ results failed to demonstrate with
significance and clarity the impact of this new climate on new venture success outcomes.
These findings represent an interesting dilemma regarding the generalizability of the funding climate impact on new venture success given the evident presence of this funding climate. Whether or not a climate for funding could have an impact on the interactions between entrepreneur and funder remains yet to be demonstrated. Researchers in this
field will now have new data to apply in learning more about entrepreneur and funder interactions from interpreting results of the 50 pairs of respondents. Building from the behavioral ecology theories of foraging and predator behaviors toward relating behavioral ecology of consumption in the business environment (Rajala & Huntula, 2000), I arrived at business funding source styles replicating those three facets: shark, hawk, and croc.
The results from the collective 50 paired expert group failed to substantiate the well documented effects of passion and preparedness toward new venture success as discussed by Chen et al. (2009). There does, however, appear to be real science behind the
anecdotal observations now popular in the “Shark Tank” television program, which displays overt predator and prey behavior of the funders and the passion and
preparedness of new venture entrepreneurs in the marketplace. Most obvious and entertaining are different funding styles and interactions with the upstart businesses, which also form the theoretical foundations of this paper. The shark, hawk, and crocodile styles differentiate the dimensions or facets of the funding techniques and form the
climate in which the entrepreneurs must function. Most interesting is the extension of established climate theories by the addition of a climate for funding to the well-known climates for justice, safety or service, and innovation.
In presenting the theoretical implications of this study, I will begin by dividing two sections or groupings of hypotheses. The first hypothesis, H1, stands alone in positing the existence of a funding climate, with the second grouping consisting of the four hypotheses regarding the moderating effect of each of the three funding climate facets on new venture success by interactions with entrepreneurial passion and preparedness. The evidence for funding climate as a new climate dimension is
satisfyingly strong, while the impact of its presence and moderating power remains inconclusive and not significant based on these results. The marginal significance of entrepreneurial passion’s and preparedness’s effects on new venture success are equally puzzling and bring into question these results in light of the previously well documented relationship between the two variables. In this chapter, I will discuss the implications of my results from theoretical and practical perspectives. Additionally, I will examine the limitations of this study and describe some potential future research possibilities to extend this work in organizational behavior.
Theoretical Implications
This research examines the perceptions of individual members of the entrepreneurial management team on how they were treated during individual interactions with potential funding sources. Multiple respondents from the same company would have required aggregating those impressions to the group level. The present research on psychological climate and to some extent organizational climate through the agency of individuals is long standing and broad, if not complexly diverse in the literature. Glick (1985) extolled the virtue of both psychological and organizational climate as useful categories of variables for multidimensional assessments of individual–
organizational relationships. This study supported individual climate perceptions presented by the actions or styles of the various funding organizations into three
distinguished modes or facets. For over the last half century, climate has been a focus of organizational psychology, beginning with the 1939 social climate study by Lewin, Lippitt and White. James and Jones (1974) advocated for distinction of psychological from organizational climate to determine the interaction between conditions of the
organization and various individual characteristics that lead to a particular perceived or psychological climate.
The ecological climate domain as it relates to the business field has significant overlap, as described by Wells (2012), and Barbosa and Castellanos (2005). The predator-prey reference is strong in the literature of both groups from the behavioral ecology of consumption model ascribed to Rajala and Hantula (2000). Because Olsen (2008) related animal and human decision-making similarities between food and investment, the notion of funders hunting for investments in the form of new venture entrepreneurs is documented. This paper reinforces that linkage between the ecological climate (predator and prey construct) and the business economic domain by aligning the search for good investments in new venture ideas with the search for food. The objective of my research on the climate created by this foraging activity in the marketplace is to fill a gap between what is known in the literature about the entrepreneurship and what is not known about the interaction with investor funding behaviors. Significant literature exists on the elements of successful entrepreneurship (Baron, 2008; Cardon, 2009; Chen, 2009) as it relates to new venture success. Similarly, the literature has rich discoveries on investors and their success. My model extends or builds from established constructs of climate such as climate for safety, service, and justice, to the existence of a climate for funding, and the model shows that it is comprised of unique but related facets.
The results suggest that there is a funding climate comprised of those three facets or factors—Sit and Pursue, Sit and Wait, and Active—which were well represented by the survey items used as describing those unique but related behaviors. I expected that the 22-item scale would run in the model after having conducted the EFA with subject matter
experts in Wallace et al. (2013). I was surprised after analyzing a moderate size (n=500) population not in the entrepreneurial or funding domain that this population would yield positive results in the Confirmatory Factor Analysis. This finding suggests that these results are strong indicators for evidence of the funding climate construct. After obtaining 50 paired respondents from the representative population of business entrepreneurs and funding sources comprised of new or expanding entrepreneurial businesses with their matching funding sources, I assumed that the data would align with the high count 500 convenience sample, which it did. The regression analysis on the funding climate’s relationship to passion and preparedness toward new venture success outcomes, however, was disappointing in that there appeared to be no statistically significant relationship as a moderator for any of the hypothesis. My results bring into question why this analysis was unable to replicate the established theories regarding passion and preparedness with new venture success.
Many aspects of this study reveal interesting and theoretically supportive results, both expected and unforeseen. The major contribution to the existing body of knowledge concerns the theories on climate. The literature on funding climate is sparse to
nonexistent. This work does represent a theoretical beginning to understanding what elements make up this construct. The three facets identified have statistical support from the reliability and internal consistency measures and the correlations between the factors.
This work has formed the foundation for what a climate for funding is and is not.
Further, it extends the current climate research by validating the first hypothesis on whether or not there exists a climate for funding.
Wells (2012) discussed the advantages and drawbacks of each style of predator
behavior in terms of a return for the effort given by the predator/ funder. The 22-item scale describing those styles was reduced, allowing the model to run and obtain
established acceptable fit parameters. The results suggest that a funding climate exists, and minimally that the items selected accurately describe it and represent unobservable characteristics from those observable ones described. The moderating effect of this climate does not seem to be statistically impactful, as indicated by the low R squared measure of each of the moderation hypotheses. Specifically, the level of new venture success does not appear to be moderated in either H2a SAW (croc) behavior or H2b SAP (hawk) behavior as it interacts with entrepreneurial passion. Because of the low
R-squared direct effect relationship between passion and new venture success, a moderated funding climate effect would be impractical and from my calculations had low R-squared as well. Additionally, the same dissatisfying results were drawn from H3 entrepreneurial preparedness as it relates to new venture success, and further modifying effects of Active (shark) behavior were not significant. Lastly, H4 of a three-way interaction of passion with preparedness with SAW (croc) behavior was not significant, as revealed by the low R-squared direct and interactive effects.
Practical Implications
Both business entrepreneurs and funders, which is another name for investors, have been searching for centuries to determine how to best use the time and money to maximize outcomes. From a business perspective, the entrepreneur works to develop an idea into a business plan that can recognize growth and market penetration past current boundaries. The ingredients are well described in the entrepreneurship literature in which passion and preparedness show prominently. Chen et al. (2009) affirmed passion and
preparedness as critical indicators for success, while Similor (1997) identified passion as the most observable trait in the entrepreneurial process. Baum and Locke (2004) pointed out that although there is no empirical relationship between passion and enterprise growth (one of our success measures), they were able to discover significant indirect and
mediating effects between the two. That finding offers promise that although this study did not find the same significance statistically, it has been seen before and could well be a factor to new venture success.
Entrepreneurs are aided in the quest for success by the scrutiny provided by any outside funding source, from their mere objectivity in assessing the concept to their knowledge of the competitive funding domain and their assessment of the displayed capability of the entrepreneurs themselves. From the collection of cognitive, affective, and behavioral skill sets that Vallerand et al. (2003) described as observable in the
entrepreneurs’ levels of passion and preparedness, funders gain a sense of what will work for their own business style and needs. The combination has to be a fit on both sides of the equation for a match to succeed.
This research attempted to model that fit by positing hypotheses that matched variables to determine which of the matches would yield a positive change. Most of the variables were paired as offsets to potential exposures fundamental in characteristics held by the other. My theory was prompted by Russell’s (2003) research regarding completely catalyzed passionate emotion, which engages the brain with both appraisals and
cognitions, therein addressing both sides of the brain functions for content analytics and affective heuristic activities. For example, in H3, in which active shark behavior of the funder was matched with the preparedness traits of an entrepreneur, the aggressive was
countered by the cautious. Similar matches were hypothesized in H2a and H2b, matching the SAW crocodile or SAP hawk characteristics of a funding source with the aggressive characteristics of a passionate entrepreneur. Because both entrepreneur and funder would seek to minimize risks for each of them stemming from the uncertainty of a new venture, the characteristics of opposing techniques or styles would add to the combined entities.
The work of Galbraith et al. (2013) stimulated my H4 hypothesis regarding the three-way interaction among passion, preparedness, and SAW crocodile climate. It was their
assertion that both the material content and delivery style of the entrepreneur’s presentation would interact, revealing measureable elements related to passion and
preparedness associated with new venture success. Combining those single path attributes described in Krulanski and Thompson’s (1999) unimodel theory regarding effective persuasion with the cautious analytics represented by crocodile SAW facet funding climate, funders and entrepreneurs would have to both relate affectively to and align cognitively on the prospects of a business plan.
Underpinning the interactions between entrepreneur and funder is the hypothesis regarding the climate in which the business entrepreneur operates. Because climate describes how the entrepreneur perceives a funding source with which she or he is engaged, it essentially defines the lens through which the entrepreneur see the marketplace and influences how that entrepreneur thinks and acts in operating the business. This is where the person-organization fit (POF) described by Parsons, Cable, and Wilkerson (1999) and Schneider’s (1983) attraction-selection-attrition (ASA) theory may collide. Both of these theories describe how alignment of values (in the case of POF) and compatibility (from ASA theory) are relevant in relating the funder and
entrepreneur in this research.
My hypotheses posited that the strong offsets to the other side’s weaknesses would result in a positive outcome of higher new venture success. My hypotheses suggest that they “cover for the other,” making the combination of characteristics beneficial from a risk mitigation and a widening skillset perspective. This mutual covering aspect, however, does not address the challenges both entrepreneur and funder face at the outset of the potential relationship in interacting and affiliating with each other. Funders could use this work to help determine the next target opportunity that fits their style of funding techniques. Introspectively, funders could assess their own characteristics through the perception of existing partner entrepreneurs to help understand more completely what style they might want to employ to change their current outcomes, including ROIs.
Business entrepreneurs might use this work to determine what funders work positively for their particular business style and attributes.
Ultimately, just as with the other well documented climates for justice,
innovation, and safety, when both funder and entrepreneur are aware of the presence of the funding climate, actions can be taken only then to best accommodate risk mitigation and respond to opportunities presented. While this study did not convincingly
demonstrate with statistical significance the impact of those interactions between passion and preparedness and facets of the funding climate, the competitive nature of the
marketplace demands businesses and funders understand those known variables to success. Just as described in the behavioral ecology theory cited in the beginning of this paper, where the interaction between predator and prey is essential to existence in the wild, so it goes in the business and investor/funder marketplace, where that same
interaction determines which businesses thrive and which struggle and risk survival.
Limitations
In all research, limitations and compromise tradeoffs are made to obtain insight and efficiently test theory. Accordingly, there are several limitations to this research requiring examination. The data collected and analyzed in this study represented
significant geographical diversity in both the convenience sample and the expert sample with respondents from North American and Europe; however, the collection was a single respondent from each organization. Although the research found a good model fit on H1 with a nonrepresentative sample of the target population, as Hinkins (1998) cautioned against, it was powered by a moderate (n=500) sample size to obtain statistical
significance, which would have been lessened by the potential outliers and miscoded response entries. The 50 expert respondent pairings yielded coefficients sufficient to show relationships but not in a large enough sample size to generate statistically
significant results or reliable model fit results from a CFA. Small sample size can restrict the detection of significant results due to low levels of statistical power (Cohen, 1988).
Further, the sample moderated regression tests yielded poor results predicting the dependent variable outcome from the interaction of two independent variables. Doubts could be raised about the phrasing of particular survey items and the potential for reverse affirmative scoring where a low number actually meant a higher alignment of the factor being measured.
After completing this research, I believe the H1 results generate strong evidence for the existence of a funding climate. Using a larger, more targeted and representative sample (Hinkins, 1995) could yield a more valuable and statistically stronger result
measure. Moreover, to improve power and increase reliability, gathering multiple respondents from each entrepreneurial management team as well as more than one respondent for each funding source is advised. That technique, however, would include aggregation, which fosters significant controversy in the organizational and psychological (individual) climate constructs, according to James and Jones (1974).
The 14-item scale for the funders to evaluate the merit, skill, and competency of the management team and their business plan limited the test to only six indicators of future success, whereas many more indicators could have generated an increasingly accurate description. The other bias of the techniques used in collecting data stems from the potential lack of objectivity of the funding respondents, all of whom were reporting on the actual businesses they had already funded: Any negative scoring of these
businesses could have been taken to reflect poorly on the judgment of their own doing.
Another factor to increasing the discrimination by the respondents would be to eliminate
Another factor to increasing the discrimination by the respondents would be to eliminate